WEBVTT - Fed Holds Rates Steady, Cuts 2025 Growth Projection 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.640 --> 0:00:12.640 This is Bloomberg Business Week Insight from the reporters and 0:00:12.800 --> 0:00:16.800 editors that bring you America's most trusted business magazine, plus 0:00:17.000 --> 0:00:20.799 global business, finance and tech news. The Bloomberg Business Week 0:00:20.840 --> 0:00:25.760 Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio. 0:00:27.240 --> 0:00:30.200 What a FED meeting? Yeah, what a market reaction? 0:00:30.400 --> 0:00:32.720 Well, listen, I think it's so interesting to hear the 0:00:32.760 --> 0:00:36.320 conversation that the gang, the surveillance Gang, really just having 0:00:36.479 --> 0:00:39.240 on television and radio about you know, was it hawkish, 0:00:39.280 --> 0:00:41.680 a little bit hawkish? Was it dubvish? We certainly saw 0:00:41.800 --> 0:00:45.600 equity Riley, we're coming off our best levels of the session. 0:00:45.640 --> 0:00:48.280 But nonetheless, Tim, we did see that immediate market reaction. 0:00:48.720 --> 0:00:51.839 Stocks moved up, we saw it, yields back off. I 0:00:51.840 --> 0:00:53.720 feel like I can't wait for the main meeting already. 0:00:54.360 --> 0:00:56.040 Yeah, I'm already looking forward to that, and we're gonna 0:00:56.040 --> 0:00:58.240 get a lot of data between now and then, too, Carol. 0:00:58.280 --> 0:01:00.279 As we heard from Charlie, the FED, as expect it 0:01:00.280 --> 0:01:03.520 held their benchmark rate study for a second straight meeting, 0:01:03.560 --> 0:01:07.400 though they telegraphed expectations for slower Carol economic growth and 0:01:07.560 --> 0:01:08.720 higher inflation. 0:01:08.600 --> 0:01:11.000 Did indeed, Ja Powell saying the ust economy, folks, it 0:01:11.080 --> 0:01:14.280 is strong overall, and yet there are some signs of moderation. 0:01:14.959 --> 0:01:18.560 Recent indications, however, point to a moderation in consumer spending 0:01:18.680 --> 0:01:21.280 following the rapid growth seen over the second half of 0:01:21.280 --> 0:01:25.920 twenty twenty four. Surveys of households and businesses point to 0:01:26.040 --> 0:01:30.440 heightened uncertainty about the economic outlook. It remains to be 0:01:30.480 --> 0:01:33.680 seen how these developments might affect future spending and investment. 0:01:35.600 --> 0:01:39.600 That, of course, with Jay Powell at the press conference 0:01:39.640 --> 0:01:42.000 today a little bit earlier. As for market reaction, as 0:01:42.000 --> 0:01:44.000 we mentioned, we did see stocks rally and use treasure 0:01:44.080 --> 0:01:46.679 yields back off right after the decision. Let's get more 0:01:46.720 --> 0:01:50.400 though on what we heard from the Fed today and 0:01:50.440 --> 0:01:53.200 what we saw in terms of market reaction. Keep in 0:01:53.200 --> 0:01:54.560 mind that we're going to be covering all of this 0:01:54.600 --> 0:01:56.160 over the next hour and a half with us as 0:01:56.160 --> 0:01:59.800 Bloomberg Intelligence Chief US Interest Rates Strategist IRA Jersey and 0:02:00.040 --> 0:02:04.560 Veronica Willis, global investment strategist at Wells Fargo Investment Institute. 0:02:04.720 --> 0:02:07.800 Ira is at BI headquarters in Prince of New Jersey. 0:02:07.840 --> 0:02:10.320 Veronica is in Saint Louis hey Ara, I want to 0:02:10.320 --> 0:02:13.120 start with you, how did the FED do you think 0:02:13.160 --> 0:02:17.120 on messaging and in assessing today's current US economic backdrop 0:02:17.200 --> 0:02:20.000 and what it needs in terms of monetary policy? And 0:02:20.000 --> 0:02:22.040 I am curious did it filmore hawkish? Did it feel 0:02:22.040 --> 0:02:23.680 more duvish? What was your read? 0:02:24.680 --> 0:02:24.760 So? 0:02:25.120 --> 0:02:28.399 Well, we have a natural language processing model that parses 0:02:28.400 --> 0:02:31.560 all the words and language from all of the opening statements, 0:02:31.880 --> 0:02:35.000 and this one was incredibly neutral, and it had been 0:02:35.080 --> 0:02:38.359 somewhat dubvish last month, and you know, being as neutral 0:02:38.360 --> 0:02:41.000 as neutral can be, it was a little bit surprising 0:02:41.040 --> 0:02:44.240 maybe to see the treasury market rally a little bit 0:02:44.320 --> 0:02:50.359 and also bowl steepened. So before the Jay Powell started 0:02:50.400 --> 0:02:54.040 to speak, treasury yields were higher by a little bit 0:02:54.080 --> 0:02:56.280 on the day, and then we rallied about ten basis 0:02:56.280 --> 0:02:59.080 points in two year yields, you know, soon after he 0:02:59.120 --> 0:03:02.000 started to speak, So the market certainly took him as dubvish. 0:03:02.080 --> 0:03:04.160 He wasn't hawkish by any stretch of the imagination. 0:03:04.919 --> 0:03:07.240 The one thing that I think is interesting is the 0:03:07.320 --> 0:03:09.920 dop plot. And you know, we thought that maybe the 0:03:10.000 --> 0:03:11.480 median dot would move down a little bit. 0:03:11.600 --> 0:03:13.919 It didn't. It stayed the same, So this is pretty 0:03:13.960 --> 0:03:14.680 unusual for. 0:03:14.680 --> 0:03:17.120 The market actually to rally like it did, or the 0:03:17.400 --> 0:03:19.720 rate market to rally like it did when the Fed 0:03:19.760 --> 0:03:20.359 didn't move the. 0:03:20.320 --> 0:03:22.880 Dots well, Ira, I wanted to talk a little bit 0:03:22.880 --> 0:03:25.920 about that, because it didn't seem like there was any 0:03:25.960 --> 0:03:30.360 certainty with regard to the Federal reserves economic outlook. We 0:03:30.400 --> 0:03:33.679 heard as much from Mike McKee on Bloomberg TV and 0:03:33.720 --> 0:03:36.880 Bloomberg Radio a little earlier. The Fed doesn't really know 0:03:37.440 --> 0:03:39.560 where we are. Why does the market think it knows 0:03:39.840 --> 0:03:40.360 where we are? 0:03:41.640 --> 0:03:45.040 Well, the market has to price something, right, So I 0:03:45.080 --> 0:03:48.800 think that the market probably took what the FED said, 0:03:48.920 --> 0:03:53.160 Not so much that they're necessarily the Fed's going to 0:03:53.200 --> 0:03:55.240 be hawkish or duvish, but I think one of the 0:03:55.280 --> 0:03:58.080 things is that the market might be thinking, hey, the 0:03:58.120 --> 0:04:00.680 Fed might make a policy mistake here because we are 0:04:00.720 --> 0:04:03.280 seeing a slowdown. But the FED and the FED dots 0:04:03.320 --> 0:04:06.120 are suggesting they're not going to cut rates very quickly 0:04:06.680 --> 0:04:08.760 and certainly not in the near term. And you really 0:04:08.800 --> 0:04:12.680 saw that rally pick up after j. Powell mentioned once 0:04:12.720 --> 0:04:15.960 again that he thought that they could that they could 0:04:15.960 --> 0:04:17.960 be patient and they didn't have to be in a hurry. 0:04:18.000 --> 0:04:20.200 I mean the exact words were, we're not in a 0:04:20.240 --> 0:04:22.960 hurry to make a rate adjustment, So that means we're 0:04:23.000 --> 0:04:25.880 here probably for another three to six months at least 0:04:25.560 --> 0:04:27.480 on the FED fundt rate. 0:04:28.440 --> 0:04:30.919 Bronick, I want to bring you into this conversation in 0:04:31.000 --> 0:04:33.280 terms of markets. We've just been talking about this with IRA. 0:04:33.320 --> 0:04:35.400 I mean, we certainly did see equity markets Riley were 0:04:35.440 --> 0:04:38.679 off our highs of the session. What's the investor read 0:04:39.000 --> 0:04:42.120 on this decision Fed commentary? Do you feel like investors 0:04:42.160 --> 0:04:44.359 have it right and it has anything that we got 0:04:44.480 --> 0:04:47.200 from the FED share and from the FOMC today in 0:04:47.240 --> 0:04:52.440 its decision and commentary and revised outlook, has it changed 0:04:52.480 --> 0:04:53.640 your investment outlook? 0:04:54.960 --> 0:04:58.039 I think that investors are really looking at the kind 0:04:58.040 --> 0:05:02.920 of best case scenario growth is going to slow enough 0:05:03.000 --> 0:05:05.599 to afford the FED to do you know, two or 0:05:05.640 --> 0:05:07.679 more cuts this year? And I think that's a little 0:05:07.680 --> 0:05:10.200 bit too optimistic. So the market may have been a 0:05:10.240 --> 0:05:13.800 little bit too optimistic today in response to this data 0:05:14.400 --> 0:05:17.560 or in response to what the FED has said, and 0:05:17.600 --> 0:05:20.919 I think that it's you know, more realistic to expect 0:05:20.960 --> 0:05:23.560 maybe one cut this year. And I think that the 0:05:23.680 --> 0:05:25.720 risk is a little bit more on the side that 0:05:25.760 --> 0:05:28.480 there might not be a cut this year versus two 0:05:28.600 --> 0:05:32.400 or more cuts. So I think it's just another example 0:05:32.720 --> 0:05:35.760 of the market kind of taking what it wants from 0:05:35.760 --> 0:05:38.039 what Pal says, taking what it wants from what the 0:05:38.040 --> 0:05:41.760 FED has shown us, and hoping for that best case scenario. 0:05:42.040 --> 0:05:43.719 I mean, what was the most important part of what 0:05:43.760 --> 0:05:45.480 we got from the FED Chair of Veronica in your 0:05:45.560 --> 0:05:46.080 view today? 0:05:47.279 --> 0:05:50.400 Yeah, I think what was really interesting were his thoughts 0:05:50.560 --> 0:05:54.919 around the consumer and how that might impact future economic data. 0:05:55.320 --> 0:05:58.080 I think that's something that's becoming more and more important, 0:05:58.200 --> 0:06:02.120 just considering how important that consumer spending is to driving 0:06:02.120 --> 0:06:05.680 our economy, and so the FED is watching really closely 0:06:05.800 --> 0:06:08.120 all of these sentiment surveys that have come out with 0:06:08.279 --> 0:06:12.320 consumers feeling uncertain about their ability to continue to spend. 0:06:12.720 --> 0:06:16.359 We haven't necessarily seen that flowing through very strongly in 0:06:16.400 --> 0:06:18.839 any of the heart data, but it's something we're watching 0:06:18.920 --> 0:06:21.000 very closely, and I think it's something that the FED 0:06:21.080 --> 0:06:22.560 is watching very closely as well. 0:06:23.560 --> 0:06:26.000 Ye, Eric, come on back in here. Given what we 0:06:26.040 --> 0:06:29.279 heard from Fetcho J. Powell today, and we think about 0:06:29.480 --> 0:06:31.760 sort of the upcoming economic data that we get, what 0:06:31.839 --> 0:06:33.640 is the next catalyst that you have your eye on. 0:06:35.480 --> 0:06:37.520 So you know, we're like in this weird place. 0:06:37.560 --> 0:06:40.520 So we do get the PC deflator next week, and 0:06:40.680 --> 0:06:42.480 you know, I'm not sure that that's really going to 0:06:42.680 --> 0:06:44.599 matter that a whole lot because we kind of know 0:06:44.640 --> 0:06:47.000 what it is, given we've gotten the inputs to that. 0:06:47.160 --> 0:06:49.120 So it's going to wind up being things like some 0:06:49.200 --> 0:06:51.679 of the survey data, the ISM data that we get 0:06:51.920 --> 0:06:55.919 in two weeks, plus the payroll report obviously is the 0:06:55.960 --> 0:06:58.440 big one. I think something else that's going to be 0:06:58.480 --> 0:07:02.240 interesting is the implementation of the slowing of runoffs. So 0:07:02.360 --> 0:07:04.560 you know, it hasn't gotten a lot of attention, only 0:07:04.600 --> 0:07:07.560 had one question at the very end of the press conference, 0:07:07.600 --> 0:07:10.680 but the Federal Reserve is again having the amount of 0:07:11.200 --> 0:07:14.040 quantitative tightening it's doing and it's only going to have 0:07:14.320 --> 0:07:16.640 about twenty billion dollars a run off come April first, 0:07:16.640 --> 0:07:19.400 And I think that that's something that is kind of 0:07:19.440 --> 0:07:21.840 flying under the radar. And how will that affect liquidity 0:07:21.880 --> 0:07:24.480 and markets once that's implemented, I think will be an 0:07:24.480 --> 0:07:26.200 interesting thing to look out for. 0:07:26.400 --> 0:07:29.160 Are you already looking forward to the main meeting? Ira? 0:07:31.000 --> 0:07:33.280 I'm looking for I look forward to every meeting, but 0:07:33.320 --> 0:07:35.600 we know we get the minutes between, then you know 0:07:35.840 --> 0:07:37.800 the minutes will be really interesting because there was a 0:07:37.840 --> 0:07:40.440 lot to unpack in this meeting, in this meeting, so 0:07:40.480 --> 0:07:42.880 the minutes could be really an interesting read when we 0:07:42.920 --> 0:07:43.840 get them in three weeks. 0:07:45.120 --> 0:07:46.720 I was gonna say, Caroly, he's not as boring as 0:07:46.760 --> 0:07:48.320 you and me where we're you know, we're just like 0:07:48.360 --> 0:07:52.080 already looking forward to the May meeting. Hey, Ira, before 0:07:52.120 --> 0:07:54.160 we let you go, what was one question that you 0:07:54.160 --> 0:07:55.800 didn't get answered from j Powell today? 0:07:57.040 --> 0:07:59.520 Yeah? I think it was a little bit about their. 0:08:00.760 --> 0:08:03.000 About the balance sheet and how they see the balance 0:08:03.000 --> 0:08:05.200 sheet reacting with the economy. 0:08:05.520 --> 0:08:07.320 He has been asked that before, but it's been a 0:08:07.360 --> 0:08:07.840 little while. 0:08:07.840 --> 0:08:11.360 And given that they that they did take action today 0:08:10.880 --> 0:08:15.600 by slowing the pace of asset runoff, that I think 0:08:15.640 --> 0:08:18.080 that can be pretty important. And he wasn't asked about 0:08:18.120 --> 0:08:20.200 the other side of the balance sheet, right, So the 0:08:20.240 --> 0:08:23.560 asset runoff occurs and then eventually we're going to have 0:08:23.800 --> 0:08:26.800 a time when there's not enough liquidity, and we know 0:08:26.880 --> 0:08:29.680 that there's been issues with the standing repo facility and 0:08:29.720 --> 0:08:33.960 some of the ways that they conduct liquidity activities and actions, 0:08:34.280 --> 0:08:36.360 and he wasn't asked at all about that either, So 0:08:36.440 --> 0:08:38.640 I would be really interested to, you know, kind of 0:08:38.679 --> 0:08:41.480 dig into those weeds because this is the plumbing of 0:08:41.559 --> 0:08:46.000 the entire financial economy that we have. So if the 0:08:46.160 --> 0:08:48.959 financial economy, the repo market, and the funding markets break, 0:08:49.240 --> 0:08:51.319 everything else comes crashing down, as we saw in two 0:08:51.320 --> 0:08:53.200 thousand and eight, right, So we have to make sure 0:08:53.600 --> 0:08:55.600 that the FED has the tools in order to handle 0:08:55.600 --> 0:08:58.680 that once we get to the lowest comfortable level of reserves. 0:09:00.160 --> 0:09:03.480 It there so much appreciate both of you and your 0:09:03.559 --> 0:09:05.760 views on all of this. Bloomberg Intelligence Chief US Interest 0:09:05.800 --> 0:09:09.640 rates Strategist Ira Jersey and Veronica Willis, Global investment strategist 0:09:09.960 --> 0:09:12.440 at Wells Fargo Investments Institute. 0:09:13.320 --> 0:09:16.880 You're listening to the Bloomberg Business Week podcast. Catch us 0:09:16.960 --> 0:09:20.400 live weekday afternoons from two to five pm Eastern. Listen 0:09:20.440 --> 0:09:24.000 on Applecarplay and the Android Auto with the Bloomberg Business app, 0:09:24.160 --> 0:09:27.680 or watch us live on YouTube Timmy. 0:09:27.720 --> 0:09:29.800 Now, we think about Ryan Deetrick a lot, and we've 0:09:29.800 --> 0:09:31.480 been hoping to catch up with him. So we're so 0:09:31.520 --> 0:09:33.160 grateful that we're going to get to him in just 0:09:33.160 --> 0:09:35.840 a moment because we just want to remind everybody. He 0:09:36.080 --> 0:09:39.160 has been a US stock optimist and write in his 0:09:39.200 --> 0:09:41.920 market recession calls for the last couple of years. He 0:09:42.000 --> 0:09:44.520 nailed it back in twenty twenty three, also twenty twenty four, 0:09:44.520 --> 0:09:46.440 and when we talked to him with him in December 0:09:46.720 --> 0:09:49.079 he said the bull run had more room to run. 0:09:49.720 --> 0:09:53.240 He did, however, early last month note that history shows 0:09:53.320 --> 0:09:56.319 us that as an Eagles Super Bowl victory could tank 0:09:56.360 --> 0:09:58.680 the stock market, something that was making the rounds on 0:09:58.720 --> 0:10:02.600 social media did note Karl that success for Philadelphia sports 0:10:02.640 --> 0:10:04.719 teams has previously been followed by trouble times in the 0:10:04.840 --> 0:10:07.160 US economy and markets. I mean, how do you even 0:10:07.240 --> 0:10:10.640 make sense of this stuff? It's like talk about somebody who, like, 0:10:10.720 --> 0:10:13.160 you know, reads astrological charts. 0:10:13.559 --> 0:10:15.120 I don't know. I think you know, you never know 0:10:15.160 --> 0:10:16.920 where the market can take its cues from. So all right, 0:10:16.960 --> 0:10:19.040 let's see what Ryan has to say. He is back 0:10:19.080 --> 0:10:21.240 with us and he is chief market strategist at the 0:10:21.360 --> 0:10:24.280 RIA and also platform for advisors the Carson Group. He 0:10:24.480 --> 0:10:27.640 is with us. Where are you Ryan today? 0:10:27.720 --> 0:10:28.360 Cincinnati? 0:10:28.559 --> 0:10:33.960 Cincinnati? So tell us that the Eagles one are we doomed? 0:10:35.120 --> 0:10:38.360 Well, that's a playful one. We don't blindly invest in that. 0:10:38.440 --> 0:10:41.240 But historically when a team from Philadelphia has won the 0:10:41.280 --> 0:10:45.000 World Series or Super Bowl, trouble has come for the 0:10:45.040 --> 0:10:47.840 stock market. Talk of two thousand and eight, you're talking 0:10:48.360 --> 0:10:51.080 the early eighties double recession. You've got the crash at 0:10:51.120 --> 0:10:54.040 twenty nine in there. Now, that's playful. You know, we're 0:10:54.040 --> 0:10:56.200 not getting two worked up on that. But the big 0:10:56.320 --> 0:11:00.080 question is is this surprising, right that we had some volatility? 0:11:00.160 --> 0:11:02.280 Second on, you got come on for a while, say 0:11:02.320 --> 0:11:04.839 we're pretty optimistic. But we've been also pointing out the 0:11:04.880 --> 0:11:08.520 first quarter of a post election years usually not that great. 0:11:08.640 --> 0:11:12.320 The first quarter after twenty percent gain usually not that great. 0:11:12.400 --> 0:11:15.520 The first quarter the last twenty years, stocks are actually 0:11:15.600 --> 0:11:19.040 negative for the year on average until like March sixteenth. 0:11:19.120 --> 0:11:22.000 March teenth set in March seventeenth, right where we bottomed, 0:11:22.040 --> 0:11:24.880 you know, potentially now and I guess welcome to March 0:11:24.920 --> 0:11:26.439 Madness said, oh, this is the radio, but I think 0:11:26.480 --> 0:11:28.400 I think I'm on YouTube. I've got my Xavier shirt 0:11:28.400 --> 0:11:31.000 on the Xavier Boy. I'm in Cincinnati. They played tonight 0:11:31.040 --> 0:11:33.240 in the first four up in dayton I'm going We're 0:11:33.280 --> 0:11:35.280 gonna take out Texas. Just wanted to say that, sorry 0:11:35.320 --> 0:11:35.959 to my friends at time. 0:11:35.960 --> 0:11:37.040 Okay, that's okay. 0:11:37.040 --> 0:11:38.800 You can make market predictions and you can also make 0:11:38.840 --> 0:11:39.920 your bracket predictions. 0:11:40.000 --> 0:11:40.440 As we're going. 0:11:40.559 --> 0:11:43.400 Ryan, So you did say, and I want to make 0:11:43.400 --> 0:11:45.880 sure you said this, you said that we did bottom 0:11:46.280 --> 0:11:47.120 for this cycle? 0:11:47.320 --> 0:11:47.840 Is that right? 0:11:48.760 --> 0:11:51.360 Well? I mean, boy, what put some pressure on me? 0:11:51.360 --> 0:11:53.200 But yeah, we think we did. I mean, listen, there's 0:11:53.240 --> 0:11:54.720 a couple of ways to look at this. We had 0:11:54.760 --> 0:11:58.520 a regular ten percent correction, didn't have one last year, right, 0:11:58.640 --> 0:12:00.480 All the fear came up when I took a look 0:12:00.559 --> 0:12:03.840 at previous twelve times the market went into a correction 0:12:04.280 --> 0:12:06.480 but did not go into a bear market. That's our 0:12:06.520 --> 0:12:09.000 base case. We do not see a bear market. Tim 0:12:09.120 --> 0:12:12.240 five of those times you bottomed the day you went 0:12:12.320 --> 0:12:15.559 into a correction, so that'd be last Thursday. And everybody 0:12:15.720 --> 0:12:18.760 was very bared up last Thursday, rightfully, so a lot 0:12:18.760 --> 0:12:20.880 of scary headlines. And then we had that back to 0:12:20.920 --> 0:12:22.839 back ninety percent up days on the S and P 0:12:22.960 --> 0:12:24.600 five hundreds and ninety percent of the stocks in the 0:12:24.640 --> 0:12:26.760 S and P five hundred of two days in a row. 0:12:26.880 --> 0:12:29.600 That historically is quite bolish. Right, six months later, you're 0:12:29.640 --> 0:12:32.760 up like fifteen percent on average, higher ten out of 0:12:32.760 --> 0:12:34.920 eleven times. That's just one data piece, But I think 0:12:34.920 --> 0:12:38.000 we had a buying thrust with extreme negativity, and now 0:12:38.000 --> 0:12:41.040 we're in the second half of March was historically pretty 0:12:41.040 --> 0:12:43.800 strong seasonally, and now we've got the FED. Listen, you 0:12:43.840 --> 0:12:45.360 guys talked about it. I know we can talk about 0:12:45.360 --> 0:12:47.360 a little more. Were they really that dubbish? I don't 0:12:47.360 --> 0:12:48.920 think so. But I think it was a relief for 0:12:49.040 --> 0:12:50.959 the market, And clearly we saw what yields did and 0:12:51.320 --> 0:12:53.559 in the market in general. But hey, you know, we're 0:12:53.559 --> 0:12:55.040 not going to complain after the run we had. 0:12:55.240 --> 0:12:59.400 Wait, so net net you also said we would be 0:12:59.679 --> 0:13:02.080 upper around twenty percent this year in US stocks, So 0:13:02.160 --> 0:13:03.120 you do still believe that. 0:13:04.320 --> 0:13:06.719 Well, our well let's see here what we was back 0:13:06.720 --> 0:13:07.280 in December. 0:13:07.480 --> 0:13:08.480 That was back in December. 0:13:08.559 --> 0:13:11.400 Well understood. Yeah, we came out early this year with 0:13:11.440 --> 0:13:13.840 between twelve and fifteen percent in the United States. So 0:13:13.880 --> 0:13:15.920 we think and we think that's very likely still, Carol, 0:13:16.080 --> 0:13:17.880 Now what we're doing with the money we run, Well, 0:13:17.880 --> 0:13:20.600 we've we've we've been in gold. She whiz. I think 0:13:20.640 --> 0:13:23.320 April of twenty twenty three added some more gold. We 0:13:23.320 --> 0:13:25.679 were very very overweight US stocks for a while come 0:13:25.760 --> 0:13:27.280 up with you. But we've kind of done some tinkering, 0:13:27.320 --> 0:13:28.839 if you will, with the models we run for A 0:13:28.920 --> 0:13:31.480 Carson Partners. We've got some treasuries for the first time 0:13:31.520 --> 0:13:33.200 in a while. We do have about a twenty percent 0:13:33.280 --> 0:13:37.240 allocation to international stocks, but we're overweight equities and still 0:13:37.280 --> 0:13:38.880 like that's the way to go. But you know, we 0:13:38.920 --> 0:13:41.040 think the other parts can do well. But to answer 0:13:41.120 --> 0:13:43.240 your specific question, yeah, we think you know, stock market, 0:13:43.240 --> 0:13:44.800 I don't know what we're down now after today's rally 0:13:44.800 --> 0:13:46.280 three or four percent for the year, we think it 0:13:46.280 --> 0:13:48.440 can still hit double digits, which which sounds like a 0:13:48.440 --> 0:13:51.120 long way away, but it's very possible. Ryan. 0:13:51.160 --> 0:13:54.920 Are you trimming Are you trimming gold and adding to 0:13:55.040 --> 0:13:57.800 international equities? Are you adding to US equities right now? 0:13:57.920 --> 0:13:59.560 What exactly is your team doing? 0:13:59.640 --> 0:14:02.480 Yeah? Great, great question there. So as of now, no, 0:14:02.679 --> 0:14:05.200 I mean gold is it is. It's a monster, and 0:14:05.320 --> 0:14:08.120 it's incredible how well it's done. What we've done. We've 0:14:08.160 --> 0:14:10.240 actually gone to some low vall. Right, we sold some 0:14:10.320 --> 0:14:12.640 high ball stocks earlier this year, went into low vall 0:14:12.679 --> 0:14:15.120 because again, is this cycle ages maybe more volatility. To 0:14:15.160 --> 0:14:19.120 be honest, we weren't crazy about the megacap or MAG seven. 0:14:19.160 --> 0:14:20.720 So we're trying to say MAG seven. I know, Kim, 0:14:20.720 --> 0:14:23.160 I want most of the last year saying more neutral tech. 0:14:23.480 --> 0:14:26.360 Sometimes we get weird looks when we said that, But 0:14:26.440 --> 0:14:28.960 now we're seeing this rotation, and again the life blood 0:14:28.960 --> 0:14:31.600 of bull market is rotation, right, So tech isn't doing 0:14:31.680 --> 0:14:35.080 quite as well. That's okay. We're seeing leadership from other areas, 0:14:35.120 --> 0:14:39.320 but areas like low volatility industrials, financials, we think those 0:14:39.320 --> 0:14:41.320 are going to continue to do pretty well, and honestly they have. 0:14:41.360 --> 0:14:45.040 I know financials had that big pullback recently recently, but 0:14:45.040 --> 0:14:47.080 we still pretty optimistic that that's a group that's probably 0:14:47.080 --> 0:14:48.240 stilling to lead this. Financials. 0:14:48.480 --> 0:14:50.560 You know, we just talked about with our TV colleagues. 0:14:51.080 --> 0:14:52.680 We made fun of them, but you know, because we 0:14:52.720 --> 0:14:54.080 had a fun story to chat about, but they had 0:14:54.120 --> 0:14:56.800 a serious one about Oppenheimer cutting Goldman, Jeffreys and Carlisle 0:14:56.840 --> 0:14:59.400 on the M and A outlook, noting that the M 0:14:59.440 --> 0:15:01.760 and A rebound likely to lay or canceled. There were 0:15:01.800 --> 0:15:05.400 a lot of expectations coming into this Trump market environment 0:15:05.440 --> 0:15:09.120 and this administration President Trump, that it was just going 0:15:09.200 --> 0:15:12.560 to be go, go go in terms of the business environment, 0:15:12.560 --> 0:15:14.720 in the market environment, it's not exactly playing out like 0:15:14.760 --> 0:15:18.920 everybody expected. I don't think, you know, trump first term 0:15:19.200 --> 0:15:23.480 is exactly playing out like Trump's second term, at least 0:15:23.520 --> 0:15:26.960 so far. So you know, if tariff's day, if new 0:15:27.000 --> 0:15:30.600 policies come, if regulations maybe aren't so friendly, if M 0:15:30.640 --> 0:15:33.520 and A doesn't come back, I mean, is that a 0:15:33.600 --> 0:15:36.040 very different market environment than in your view. It may 0:15:36.040 --> 0:15:38.760 be your expectations for twelve or fifteen percent gains on 0:15:38.800 --> 0:15:40.720 the S and P are not then realistic. 0:15:41.640 --> 0:15:43.200 No, those are some great points. I will say. I 0:15:43.240 --> 0:15:45.960 heard you guys talking about Denny's and sausage and pancakes 0:15:46.000 --> 0:15:47.480 where I came on, I was kind of jealous. I 0:15:47.480 --> 0:15:49.760 didn't you have to talk about that. I love Denny's obviously, 0:15:50.000 --> 0:15:52.040 but you get in you get into it here. And 0:15:52.440 --> 0:15:54.640 I think what people thought when when President Trump won 0:15:55.040 --> 0:15:56.960 was You're going to get a couple things right, deregulation, 0:15:57.880 --> 0:16:03.040 better taxes, and tariffs in that order. We're not getting 0:16:03.360 --> 0:16:05.760 in that order, as we all know. You know, so 0:16:05.920 --> 0:16:08.880 I if the animal spirits is a popular word coming 0:16:08.880 --> 0:16:12.960 into this year, clearly those have been screeched to a halt. 0:16:13.000 --> 0:16:14.360 If you will, when you look at some of the 0:16:14.400 --> 0:16:17.240 sentiment polls, soft soft data centiment polls and things like that. 0:16:17.920 --> 0:16:20.120 But again, I guess you could say we're optimistic that that. Yes, 0:16:20.160 --> 0:16:22.920 we're all worked up over tariffs, and rightfully so. April second, 0:16:23.000 --> 0:16:25.720 as everybody knows, is that big day. But the market. 0:16:25.800 --> 0:16:27.520 I think the markets can go up on good news. 0:16:27.520 --> 0:16:29.080 Marts can go up on bad news. I mean five 0:16:29.160 --> 0:16:30.280 years ago now bad news. 0:16:30.400 --> 0:16:33.240 But there's good news, there's good news, there's good news, 0:16:33.400 --> 0:16:35.920 there's bad news, there's bad news. Do you feel comfortable 0:16:35.920 --> 0:16:37.960 in this market environment that we're not gonna have a 0:16:38.000 --> 0:16:40.160 lot of surprises and unexpected things coming our way? 0:16:40.160 --> 0:16:42.000 Well, put it this way, we do because we're still 0:16:42.000 --> 0:16:44.440 overweight equities and the unconstrained models we run, we're about 0:16:44.480 --> 0:16:47.360 seventy six percent equities, sixty percent is considered, you know, 0:16:47.440 --> 0:16:49.440 kind of right down the middle. So yes, we're overweight. 0:16:49.480 --> 0:16:50.840 And again a lot of it has to do with 0:16:50.880 --> 0:16:52.880 that over the top negative centiment. I'm sure other guests 0:16:52.920 --> 0:16:54.680 have talked about some of these things. We saw a 0:16:54.720 --> 0:16:57.360 huge Potz to call ratio spike last Thursday, But the 0:16:57.360 --> 0:17:00.520 one that AAII Cinnamon poll. I know this flaws in 0:17:00.520 --> 0:17:02.160 this one, but three weeks in a row, fifty five 0:17:02.200 --> 0:17:04.399 percent bears. All right, we haven't seen that since the 0:17:04.400 --> 0:17:07.320 March two thousand and nine low. It's just the random indicator. 0:17:07.359 --> 0:17:09.800 I have just hearing from people haven't heard from for years, 0:17:10.040 --> 0:17:12.880 but are very worried on what we're calling a kind 0:17:12.880 --> 0:17:15.720 of run of the mill normal ten percent correction. You 0:17:15.800 --> 0:17:18.200 tendesseee A lot of years that could be bullish with 0:17:18.240 --> 0:17:20.600 those lowered expectations, and today the Fed with it really 0:17:20.600 --> 0:17:22.399 that dubbish, Honest to goodness. I don't know if they 0:17:22.440 --> 0:17:24.879 really were, but they weren't hawkish and the market liked it. 0:17:25.600 --> 0:17:28.440 Ryan twenty seconds left. What makes you change your view 0:17:28.560 --> 0:17:31.040 that this will be an up year for the equity ends? 0:17:31.080 --> 0:17:33.199 Okay? Yeah, it turn us a little more cautious or negative. 0:17:33.200 --> 0:17:35.199 I think of more of a spike in credit spreads. Right, 0:17:35.200 --> 0:17:38.480 we are not seeing stress in the credit markets. Some yes, 0:17:38.520 --> 0:17:40.760 but Tim, we're just simply not seeing that. There's less 0:17:40.760 --> 0:17:42.840 stress now than it was in March. I'm sorry in 0:17:42.880 --> 0:17:45.160 August when we had that very scary un carry trade 0:17:45.160 --> 0:17:46.520 on wine. So that's the thing we watch. We're not 0:17:46.560 --> 0:17:47.160 seeing it yet. 0:17:47.560 --> 0:17:48.840 All right, can leave with Dietrich. 0:17:49.280 --> 0:17:50.960 Yeah, go ahead, Carol go. 0:17:51.080 --> 0:17:54.800 Behavior always fun, always fun. You keep us on our toes. 0:17:54.880 --> 0:17:58.320 Ryan Dietrich, chief market strategist at the Carson Group. 0:18:00.000 --> 0:18:03.760 This is the Bloomberg Business Week Podcast. Listen live each 0:18:03.800 --> 0:18:06.960 weekday starting a two pm Eastern on applecar Play and 0:18:07.040 --> 0:18:09.679 the Android Auto with the Bloomberg Business App. You can 0:18:09.720 --> 0:18:12.879 also listen live on Amazon Alexa from our flagship New 0:18:12.960 --> 0:18:16.560 York station Just Say Alexa played Bloomberg eleven thirty. 0:18:17.560 --> 0:18:19.160 I wanted to get to some of the big news 0:18:19.160 --> 0:18:21.760 of the day. President Trump started phone talks today with 0:18:21.840 --> 0:18:25.920 Ukrainian counterpart Voladimir Zelenski, a day after the US president's 0:18:25.920 --> 0:18:29.000 conversation with Vladimir Putin failed to win Russia's commitment to 0:18:29.040 --> 0:18:32.480 a thirty day ceasefire in Ukraine. Now earlier today on 0:18:32.520 --> 0:18:36.280 Bloomberg Surveillance on TV and radio, President Trump Special Envoy 0:18:36.320 --> 0:18:39.880 Steve Witkoff said that he believes President Putin is operating 0:18:39.920 --> 0:18:41.800 in good faith and that an end of the war 0:18:42.080 --> 0:18:42.760 could be soon. 0:18:43.440 --> 0:18:46.199 On Monday, we actually have the technical teams going in 0:18:46.320 --> 0:18:49.680 why because that's what we're down to. We don't need 0:18:49.720 --> 0:18:53.720 to have larging the larger overarching discussions that's been had 0:18:53.840 --> 0:18:57.360 and it was completed yesterday between the two leaders. They 0:18:57.400 --> 0:19:03.560 agreed on a pathway to to some ceasefire conditions today 0:19:03.920 --> 0:19:06.560 and to a full on cease fire that will be 0:19:06.640 --> 0:19:09.600 negotiated over the coming days. I actually think in a 0:19:09.600 --> 0:19:10.800 couple of weeks we're going to get. 0:19:10.720 --> 0:19:13.919 To it again. That's Steve Whitkoff, President Trump Special Envoy 0:19:14.080 --> 0:19:17.280 earlier on Bloomberg Surveillance. We also heard yesterday from the 0:19:17.280 --> 0:19:19.880 White House after that two and a half hour call 0:19:19.960 --> 0:19:23.080 between Presidents Trump and Putin, the White House read out 0:19:23.080 --> 0:19:25.560 that the two leaders agree that a future with an 0:19:25.600 --> 0:19:28.600 improved bilateral relationship between the United States and Russia has 0:19:28.720 --> 0:19:33.280 huge upside. This includes enormous economic deals and geopolitical stability 0:19:33.520 --> 0:19:36.560 when peace has been achieved. So the question is, can 0:19:36.600 --> 0:19:39.960 there be enormous economic deals business deals between the two nations? 0:19:40.000 --> 0:19:42.480 And if this feels a little bit like dejevou, you 0:19:42.520 --> 0:19:45.080 are right. A new book outlooks at just that and 0:19:45.119 --> 0:19:48.400 the recent experiment in capitalism from the nineteen nineties until 0:19:48.440 --> 0:19:52.160 twenty twenty two when global companies set up shop in Russia. 0:19:52.240 --> 0:19:54.760 Writing about that is Charles Hecker. He's a journalist and 0:19:54.880 --> 0:19:58.199 risk management consultant. His book just out this month is 0:19:58.280 --> 0:20:01.360 zero Sum, the arc of inter national business in Russia. 0:20:01.560 --> 0:20:04.359 He has spent forty years working in the Soviet Union 0:20:04.400 --> 0:20:07.879 and Russia, and he joins Tim and me on this Wednesday. 0:20:08.000 --> 0:20:10.760 So delighted to have you here with us. Charles. I 0:20:10.760 --> 0:20:13.280 do want to first ask you about what's been going 0:20:13.320 --> 0:20:16.399 on over the last couple of days and the conversations 0:20:16.440 --> 0:20:19.160 between the presidents of the United States, Ukraine and Russia. 0:20:19.240 --> 0:20:22.919 Does this look like to you like lasting diplomacy being 0:20:23.000 --> 0:20:26.240 worked out, peace negotiations being worked out. What's your read, 0:20:26.400 --> 0:20:29.720 especially with your knowledge of Russia and Putin? 0:20:30.200 --> 0:20:32.639 I think right now somewhere we're between two steps forward, 0:20:32.640 --> 0:20:35.000 one step back, or maybe even one step forward two 0:20:35.040 --> 0:20:38.600 steps back. I mean from today's conversation between President Trump 0:20:38.640 --> 0:20:41.800 and President Zelenski, we can at least draw the conclusion 0:20:42.000 --> 0:20:45.320 that the two presidents are once again sort of speaking regularly, 0:20:45.359 --> 0:20:48.520 speaking normally, and without the anger and the hostility that 0:20:48.560 --> 0:20:51.199 we saw of a couple of weeks ago that really 0:20:51.240 --> 0:20:53.520 set this process back dramatically. 0:20:53.600 --> 0:20:56.200 So we have a bit of a victory there. 0:20:56.000 --> 0:20:59.479 In that the two presidents are communicating as far as 0:20:59.520 --> 0:21:03.400 the Act Will Peace Agreement or the cease fire between 0:21:03.520 --> 0:21:06.600 Russia and Ukraine. Both sides are already accusing each other 0:21:06.640 --> 0:21:10.159 of violating that. This morning, so there were attacks allegedly 0:21:10.200 --> 0:21:13.199 from Russia on Ukrainian energy installations, and Russia says that 0:21:13.280 --> 0:21:14.920 Ukraine is doing the exact same thing back. 0:21:15.680 --> 0:21:19.200 So when Steve Woodkoff says he believes that, I think 0:21:19.200 --> 0:21:20.919 he said to some extent, well, some of these attacks 0:21:20.960 --> 0:21:23.080 were already happening, or I don't know. I guess the 0:21:23.080 --> 0:21:25.399 devil and timing is always in the detail, or the 0:21:25.440 --> 0:21:30.000 devil's in the details. He believes that President Putin is 0:21:30.040 --> 0:21:34.760 acting in good faith. Your knowledge of President Putin and 0:21:35.320 --> 0:21:39.560 how he does things, do you think he is well. 0:21:39.600 --> 0:21:42.320 One of President Trump's predecessors in the White House, when 0:21:42.359 --> 0:21:46.439 talking about Russia, always said trust, but verify, And you know, 0:21:46.480 --> 0:21:49.040 there hasn't been a whole lot of verification going on lately. 0:21:49.359 --> 0:21:51.520 And what we do know is that President Putin has 0:21:51.520 --> 0:21:54.080 in the past gone back on his word when it 0:21:54.160 --> 0:21:58.280 comes to holding off on attacking Ukraine. And so with 0:21:58.320 --> 0:22:00.520 what happened this morning, and with the fact that the timing, 0:22:00.560 --> 0:22:03.280 as you suggest, is still incredibly vague on when this 0:22:03.400 --> 0:22:06.280 is all going to start and when the ceasefire will 0:22:06.359 --> 0:22:08.680 kick off. We still don't know, first of all, what 0:22:09.040 --> 0:22:12.680 President Putin's word is and when or if he'll start 0:22:12.680 --> 0:22:13.239 to obey it. 0:22:15.200 --> 0:22:17.960 So I just want to get your thoughts about where 0:22:17.960 --> 0:22:21.199 we are in your view, if this actually is the 0:22:21.240 --> 0:22:23.439 beginning of the end of the war. You mentioned that 0:22:23.640 --> 0:22:26.880 both sides are already not agreeing to what had been 0:22:27.080 --> 0:22:30.359 agreed upon, but you also said that it's good news 0:22:30.400 --> 0:22:33.840 that the US is speaking to both of these parties. 0:22:33.960 --> 0:22:35.480 Do you actually think this is the beginning of the 0:22:35.560 --> 0:22:35.960 end of the war. 0:22:37.040 --> 0:22:37.720 It might be. 0:22:37.840 --> 0:22:39.240 I mean, I think if this is the beginning of 0:22:39.240 --> 0:22:40.679 the end of the war, it's going to take a 0:22:40.680 --> 0:22:43.640 lot longer than any of us anticipate, and a lot 0:22:43.720 --> 0:22:47.520 longer than any of the actors in these negotiations are 0:22:47.560 --> 0:22:49.840 telling us. I mean, we know, look that the strategic 0:22:50.000 --> 0:22:53.840 driver for Putin behind all of this is to keep fighting. 0:22:54.040 --> 0:22:57.600 So when he says that he's engaged in ceasefire negotiations, 0:22:57.600 --> 0:23:00.680 when he says this he's interested in a ceasefire, he's 0:23:00.720 --> 0:23:04.040 really not being entirely genuine with his counter parties, because 0:23:04.080 --> 0:23:06.159 really what Putin wants to do is to continue to 0:23:06.200 --> 0:23:09.080 press on. He thinks he's winning on the ground in Ukraine. 0:23:09.400 --> 0:23:12.359 His progress has been a little bit better than previously, 0:23:12.720 --> 0:23:15.080 and right now there's very little incentive for him to stop. 0:23:16.000 --> 0:23:18.119 So that's the perfect place to sort of transition to 0:23:18.200 --> 0:23:22.840 business in Russia over the last few decades, something that 0:23:23.080 --> 0:23:25.960 you've been writing about and that you know a lot about. 0:23:26.160 --> 0:23:28.320 If we were talking to you three years ago, we'd 0:23:28.320 --> 0:23:30.360 be talking to you about all the American businesses that 0:23:30.560 --> 0:23:33.399 have announced that they've stopped doing business in Russia as 0:23:33.400 --> 0:23:36.280 a result of Russia's invasion of Ukraine. I think a 0:23:36.320 --> 0:23:38.680 lot of people then would have thought this is going 0:23:38.720 --> 0:23:42.280 to have huge economic consequences and effects on the country 0:23:42.280 --> 0:23:45.880 and might cause Russia to think twice about what it's 0:23:45.920 --> 0:23:46.760 doing militarily. 0:23:47.680 --> 0:23:49.480 That obviously didn't happen, right. 0:23:49.560 --> 0:23:50.320 Well, exactly right. 0:23:50.320 --> 0:23:52.640 I mean, if we were talking about this precisely three 0:23:52.720 --> 0:23:56.200 years ago, what we would be talking about is absolute 0:23:56.280 --> 0:24:01.760 sort of streams of Western executives stampedeading towards Moscow's airports, 0:24:01.800 --> 0:24:04.960 among other places, trying to get out of the country. 0:24:05.480 --> 0:24:08.920 And this was exactly three years ago, a time when 0:24:09.440 --> 0:24:14.560 international offices, European and American offices were physically emptying out 0:24:14.680 --> 0:24:17.879 of expats and of Russian employees who were desperate to 0:24:17.960 --> 0:24:21.080 leave the country because the full scale engage invasion was 0:24:21.200 --> 0:24:24.200 kicking off. And so if we look at it now, 0:24:24.680 --> 0:24:29.280 you know, the US business community is looking at the 0:24:29.320 --> 0:24:34.560 negotiations between Trump and Putin and they sense that sanctions 0:24:34.640 --> 0:24:39.440 relief is in the air. And there are active conversations 0:24:39.520 --> 0:24:42.920 now in the companies that left Russia three years ago 0:24:43.200 --> 0:24:46.679 about going back. Not everyone will do it, but everyone 0:24:46.800 --> 0:24:47.640 is talking about it. 0:24:47.800 --> 0:24:49.959 Yet you know, you're right, or you note that in 0:24:50.040 --> 0:24:53.119 like one generation, we saw Russia open its doors and 0:24:53.160 --> 0:24:58.200 then close them again. So I mean what ultimately rules 0:24:58.240 --> 0:25:02.080 in Russia? Is it m is it business? Is it politics? 0:25:02.440 --> 0:25:04.959 Well, you're right, I mean the last generation in Russia 0:25:05.040 --> 0:25:08.760 was one of the biggest experiments in global capitalism ever. 0:25:09.119 --> 0:25:12.400 You had this emerging market opening up during a time 0:25:12.440 --> 0:25:17.800 when companies were globalizing rapidly, and everyone rushed into Russia 0:25:17.920 --> 0:25:21.320 following the collapse of the Soviet Union. You know, for 0:25:21.440 --> 0:25:25.119 companies to go back, it is partially all about money, 0:25:25.160 --> 0:25:27.000 but it's about that and a lot more. 0:25:27.040 --> 0:25:29.000 It's about a change. 0:25:28.600 --> 0:25:31.119 To the risk reward equation. 0:25:31.720 --> 0:25:35.239 And in the nineteen nineties, just about anything that you 0:25:35.280 --> 0:25:38.639 did in Russia, almost any kind of Western business activity 0:25:38.960 --> 0:25:41.480 made money. It was really like, you know, plant any 0:25:41.480 --> 0:25:44.640 seed and it would grow. That is no longer the case. 0:25:44.680 --> 0:25:47.200 Companies that want to go back to Russia or are 0:25:47.240 --> 0:25:49.800 thinking about going back, are not going back to the 0:25:49.880 --> 0:25:52.280 Russia of the nineteen nineties, not going back to the 0:25:52.320 --> 0:25:54.200 real go go days of the two thousands. 0:25:54.480 --> 0:25:55.680 It's very different now. 0:25:55.800 --> 0:25:57.440 Well, talk to us about this, and this is something 0:25:57.480 --> 0:26:02.280 Tim and I talked about with Angelus, who has understands Putin, 0:26:02.400 --> 0:26:04.840 understands Russia too, And I said, you know, what is 0:26:04.880 --> 0:26:07.840 today's Russia? What is Putin's Russia? Is it a great power? 0:26:07.880 --> 0:26:10.680 Is it a great economy? You know, what are their businesses, 0:26:10.680 --> 0:26:12.520 their alliances? Like what do we need to know? And 0:26:12.560 --> 0:26:15.080 some of it I asked facetiously when I said is 0:26:15.119 --> 0:26:17.920 it a great economy? But I mean, what is it today? 0:26:18.240 --> 0:26:19.719 Well, you know, there were a lot of people, not 0:26:19.760 --> 0:26:21.320 Angelis Stunt, who is one of my idols in the 0:26:21.320 --> 0:26:23.760 field of Soviet and Russian studies, from way back in 0:26:23.800 --> 0:26:25.680 the day. You know, there were people that said that 0:26:25.760 --> 0:26:28.679 Russia was a gas station with nukes, and you know, 0:26:28.760 --> 0:26:32.800 that is a vast underestimation of Russia's role in the 0:26:32.840 --> 0:26:36.600 global economy, and we understood that when Russian gas and 0:26:36.680 --> 0:26:39.640 oil and all of that came under sanctions, or oil 0:26:39.680 --> 0:26:42.280 came under sanctions, and when the Europeans tried to chase 0:26:42.320 --> 0:26:45.480 gas out of their pipelines, we understood what happened to prices. 0:26:45.560 --> 0:26:49.040 We also understood what happened on global grain markets after 0:26:49.080 --> 0:26:52.040 the start of the full scale invasion. So Russia is 0:26:52.080 --> 0:26:56.000 a lot more plugged into the global economy than we 0:26:56.080 --> 0:26:59.160 ever thought, and perhaps even more than we think, particularly 0:26:59.200 --> 0:27:02.800 an area of precious metals, rare earth metals, critical minerals. 0:27:03.280 --> 0:27:07.080 These are places where Russia has significant strategic deposits that 0:27:07.119 --> 0:27:09.680 are useful not just to Russia but to everybody else 0:27:09.920 --> 0:27:12.760 around the world. So you know, there is reason to 0:27:12.880 --> 0:27:15.640 go back in There are companies that are thinking about it. 0:27:16.040 --> 0:27:19.000 But but the war lasted a lot longer and is 0:27:19.119 --> 0:27:23.720 lasting a lot longer than anybody ever thought, and enormous 0:27:23.800 --> 0:27:27.240 changes have taken place on the ground politically and economically 0:27:27.320 --> 0:27:29.800 in Russia. And if you're thinking of going about going back, 0:27:30.040 --> 0:27:31.919 you have to be thinking, well, what kind of Russia 0:27:32.040 --> 0:27:32.880 is waiting for us? 0:27:33.960 --> 0:27:37.159 Well, what kind of what did Russian businesses Charles do 0:27:37.920 --> 0:27:41.280 to replace American businesses and Western businesses that left. We 0:27:41.320 --> 0:27:44.919 all saw stories of McDonald's, for example, pulling out. That 0:27:44.960 --> 0:27:47.080 was such a prominent example because of what happened in 0:27:47.119 --> 0:27:49.280 the when the fall of the Soviet Union happened, and 0:27:49.320 --> 0:27:52.560 that first McDonald's opened up in Russia. But we saw 0:27:52.600 --> 0:27:57.399 this sort of Russian version of McDonald's come in. What 0:27:57.480 --> 0:27:59.560 has been what has happened on the ground since American 0:27:59.640 --> 0:28:00.920 and Western businesses have left. 0:28:01.000 --> 0:28:02.960 Yeah, a lot of different things have happened since since 0:28:03.040 --> 0:28:06.320 Western and American companies left, and that is that you're 0:28:06.320 --> 0:28:09.680 absolutely right to point out that a number of significant 0:28:10.040 --> 0:28:13.280 Western brands, including McDonald's, which everybody loves to look at 0:28:13.359 --> 0:28:16.640 when we're talking about Russia, but other companies like Starbucks, 0:28:16.640 --> 0:28:19.560 for example, had a massive presence in Russia, and they're 0:28:19.560 --> 0:28:23.879 gone too. They've been taken over by local Russian owners. 0:28:23.920 --> 0:28:27.160 They were sold when those two companies decided that they 0:28:27.200 --> 0:28:30.399 wanted out. And so what those companies have been doing 0:28:30.680 --> 0:28:35.119 has been winning, growing and maintaining market share and trying 0:28:35.160 --> 0:28:38.160 to sort of run businesses. And right now it's very 0:28:38.160 --> 0:28:42.360 difficult to understand whether the current owners of McDonald's or 0:28:42.400 --> 0:28:44.960 Starbucks or any of the other companies that left. You 0:28:45.000 --> 0:28:47.960 know how keen they are to sell those back to 0:28:48.000 --> 0:28:50.080 the people that they bought them for just a couple 0:28:50.120 --> 0:28:52.320 of years ago. The other thing that's happened on the 0:28:52.320 --> 0:28:57.239 market is that companies from non sanctioning countries have moved in, 0:28:57.280 --> 0:29:00.760 and that includes countries like Turkey and China. They've taken 0:29:00.760 --> 0:29:04.040 over market share. They've moved in, and it's going to 0:29:04.080 --> 0:29:07.920 be difficult for returning companies to dislodge them. 0:29:08.520 --> 0:29:12.600 So it raises the question about initially why the companies 0:29:12.920 --> 0:29:16.120 left during the invasion. In your view, was it because 0:29:17.000 --> 0:29:20.920 it was seen as not ethical to do business and 0:29:20.960 --> 0:29:23.760 support a country that had this invasion, Was it because 0:29:23.800 --> 0:29:29.240 of American regulations or was it an actual business decision. 0:29:30.320 --> 0:29:33.320 There were a few different decisions. In some cases, sanctions 0:29:33.360 --> 0:29:35.840 made it illegal to do business in Russia, and there 0:29:35.840 --> 0:29:39.040 were companies that just had to get out because there 0:29:39.080 --> 0:29:41.920 was no way that they could transact in Russia at 0:29:41.960 --> 0:29:45.880 all without violating sanctions. Other companies looked at the reputational 0:29:46.000 --> 0:29:49.320 risk of doing business in Russia, and you had significant 0:29:49.360 --> 0:29:52.640 external pressure on these companies saying why are you still 0:29:52.640 --> 0:29:55.520 in Russia? You're paying taxes to the Russian government. The 0:29:55.600 --> 0:29:58.120 Russian government is using that money to buy weapons to 0:29:58.200 --> 0:30:01.120 kill Ukrainians, So what are you doing doing there? Companies 0:30:01.160 --> 0:30:05.040 felt that reputational pressure and they left. And then there 0:30:05.040 --> 0:30:07.840 were companies that for whom it was easier to leave 0:30:07.880 --> 0:30:10.760 because maybe Russia wasn't that big a market, maybe they 0:30:10.800 --> 0:30:14.000 weren't doing all that well there anyway, and why bother 0:30:14.160 --> 0:30:16.000 with all of the difficulty of doing business in this 0:30:16.080 --> 0:30:18.640 kind of environment, and so they also packed up and left. 0:30:18.840 --> 0:30:20.040 One of the things I want to ask you, and 0:30:20.040 --> 0:30:22.040 I thought about this, Charles. We are talking with Charles Hecker, 0:30:22.160 --> 0:30:25.440 journalist and risk management consultant. His book out this month, 0:30:25.520 --> 0:30:28.800 Zero Sum The Arc of International Business in Russia, spending 0:30:28.800 --> 0:30:32.200 some four decades in Russia and the former Soviet Union. 0:30:32.480 --> 0:30:37.720 You know, I think we think that introduce capitalism, introduced 0:30:37.880 --> 0:30:42.720 Western businesses, whether it's China, whether it's Russia, that these countries, 0:30:42.760 --> 0:30:46.520 these places will become liberal democracies. And here we are 0:30:46.560 --> 0:30:50.080 again seeing that it really doesn't work. So is it 0:30:50.120 --> 0:30:53.600 not going to work if we continue to get what's 0:30:54.040 --> 0:30:56.960 wrong with our thinking or why is it not working? 0:30:57.560 --> 0:31:00.000 One of the lessons that we have to have learned 0:31:00.040 --> 0:31:04.440 earned on exiting Russia, is that the assumption we made, 0:31:04.680 --> 0:31:06.640 just as you said, Carol, the assumption that we made 0:31:06.680 --> 0:31:10.400 on the way in, that engaging with Russia economically and 0:31:10.480 --> 0:31:15.000 commercially and sending Big Max to Russia would transform the 0:31:15.080 --> 0:31:18.560 country somehow into a mirror image of the West, or 0:31:18.600 --> 0:31:22.080 into at least a sort of liberal democracy that we 0:31:22.120 --> 0:31:23.080 could get along with. 0:31:23.680 --> 0:31:24.680 And you know, I think. 0:31:24.480 --> 0:31:27.080 We've learned over the years, whether we're talking about Russia 0:31:27.160 --> 0:31:30.080 or we're talking about China for example, or other countries, 0:31:30.120 --> 0:31:33.200 that you know, eating Big Max doesn't make you a democrat, 0:31:33.680 --> 0:31:37.440 you know, little d democrat. And so you know, if 0:31:37.560 --> 0:31:41.320 companies once again go back to Russia and think, look, 0:31:41.360 --> 0:31:42.640 you know, we're going to be on the ground and 0:31:42.640 --> 0:31:44.480 we're going to give this a chance, and we think 0:31:44.520 --> 0:31:48.760 that Russia may reform, that's a mistaken assumption. And you know, 0:31:48.800 --> 0:31:51.560 we realize that perhaps a little bit too slowly. I 0:31:51.560 --> 0:31:53.600 don't want to be too judgmental about our experience in 0:31:53.680 --> 0:31:55.760 Russia over the past generation. 0:31:55.880 --> 0:31:57.200 But it was a flawed assumption. 0:31:57.800 --> 0:32:00.800 So President Trump seems to want to create economic ties 0:32:00.840 --> 0:32:03.800 between the US and Russia. Some say, you know, the 0:32:04.120 --> 0:32:06.479 diplomacy or lack thereof or whatever you want to call 0:32:06.520 --> 0:32:09.240 it that we've had between the US and Russia and 0:32:09.880 --> 0:32:13.960 President Putin so far has not created a better relationship. 0:32:14.440 --> 0:32:18.920 So maybe this could Is that even possible with your 0:32:19.040 --> 0:32:23.800 knowledge of President Putin, how he runs the country, his 0:32:23.880 --> 0:32:26.520 type of leadership. I mean, is there some good that 0:32:26.560 --> 0:32:27.320 could come out of this? 0:32:28.000 --> 0:32:31.720 I think President Putin is going to remain resolutely hostile 0:32:31.760 --> 0:32:34.960 to the West going through the United States included, yes, absolutely, 0:32:35.880 --> 0:32:40.360 capitol W boldface letters. He is going to remain hostile 0:32:40.680 --> 0:32:42.320 to the West and the United States, and he will 0:32:42.360 --> 0:32:45.320 see them as enemy nations, and he will take a 0:32:45.520 --> 0:32:49.800 very skeptical view towards companies that come from those countries. 0:32:50.040 --> 0:32:54.000 And so he certainly doesn't believe that allowing Western companies 0:32:54.240 --> 0:32:57.959 into Russia or American companies into Russia is you know, 0:32:58.160 --> 0:33:01.720 an overwhelming good for the Russian economy or certainly for 0:33:01.760 --> 0:33:05.080 the Russian political system. And that's something that companies are 0:33:05.080 --> 0:33:08.320 going to have to manage and overcome and be extremely 0:33:08.440 --> 0:33:13.320 acutely aware of if or when they go back in tim. 0:33:13.200 --> 0:33:14.760 Ie, you get a quick one last question. 0:33:15.120 --> 0:33:20.040 Choy, Yeah, Charles, would you recommend that companies just don't 0:33:20.080 --> 0:33:21.280 go back to Russia. 0:33:23.600 --> 0:33:25.120 Companies are going to make up their minds about this 0:33:25.160 --> 0:33:27.400 based on how they view the risk reward decision. And look, 0:33:27.440 --> 0:33:31.400 there are companies out there in for example, the energy sector, 0:33:31.440 --> 0:33:34.760 in natural resources, in metals and minerals and mining that 0:33:34.960 --> 0:33:40.240 have really robust appetites for risk and cast iron stomachs 0:33:40.240 --> 0:33:44.240 for managing it. They will probably go back, and they're 0:33:44.280 --> 0:33:46.520 going to do it carefully. They've done this before. They're 0:33:46.520 --> 0:33:49.800 doing business in places like Iraq right now. So they'll 0:33:49.800 --> 0:33:51.920 go back to Russia and we'll see how they survive. 0:33:52.200 --> 0:33:54.160 Listen, so love this. Hope you can get you back 0:33:54.160 --> 0:33:55.600 real soon, because we know that this is going to 0:33:55.600 --> 0:33:58.320 be certainly an ongoing and kind of story that will 0:33:58.360 --> 0:34:01.440 probably go on for a while. Charles, thank you so much. 0:34:01.440 --> 0:34:02.040 Collect with the book. 0:34:02.080 --> 0:34:02.920 It's a pleasure. Thank you. 0:34:03.120 --> 0:34:06.280 Pleasure is ours as well. Charles Hecker, journalist, risk management consultant. 0:34:06.280 --> 0:34:08.560 Book just out. It is called Zero Sum The Arch 0:34:08.600 --> 0:34:10.200 of International Business in Russia. 0:34:11.080 --> 0:34:14.640 You're listening to the Bloomberg Business Week podcast. Catch us 0:34:14.719 --> 0:34:18.160 live weekday afternoons from two to five pm Eastern. Listen 0:34:18.200 --> 0:34:21.720 on Applecarplay and Android Auto with the Bloomberg Business app, 0:34:21.880 --> 0:34:24.279 or watch US live on YouTube. 0:34:24.560 --> 0:34:27.000 Yes, Splashdown Crew nine back on Earth. 0:34:30.000 --> 0:34:33.440 Yes, indeed everybody, Yes, those two NASA astronauts whose planned 0:34:33.440 --> 0:34:35.279 short trip to space became one that left them in 0:34:35.360 --> 0:34:37.919 orbit for nine months. Yes, you know they are back 0:34:37.960 --> 0:34:42.000 on planet Earth. But Wilmore and Sonny Williams coming home 0:34:42.040 --> 0:34:44.520 to a United States though, that is a bit differently 0:34:44.880 --> 0:34:46.840 are different, I should say, it's got a new president, 0:34:46.920 --> 0:34:49.400 a new Republican controlled Congress, and a world that some 0:34:49.480 --> 0:34:53.839 would say is being turned upside down by new US policies. Now, 0:34:53.880 --> 0:34:57.040 those two NASA astronauts also returned to Earth in a 0:34:57.200 --> 0:35:00.319 SpaceX craft, which is, of course, you know, space X 0:35:00.400 --> 0:35:03.680 a part of the Elon Musk Empire. So too is Doze, 0:35:03.800 --> 0:35:06.040 the entity that is tasked with an ever widening mission 0:35:06.080 --> 0:35:09.200 to seemingly remake the US government, and that includes cuts 0:35:09.200 --> 0:35:12.120 and spending and in the federal workforce. So we thought 0:35:12.120 --> 0:35:14.000 it was time to do kind of a check on 0:35:14.080 --> 0:35:17.319 all things Elon and Tesla and SpaceX and Doze and more. 0:35:17.760 --> 0:35:19.640 To do that, we have back with us Bloomberg business 0:35:19.680 --> 0:35:22.319 Week columnist Max Chafkin. He is co host of the 0:35:22.320 --> 0:35:25.480 elon Ing podcast, author of the Contrarian Peter Teel and 0:35:25.480 --> 0:35:28.480 Silicon Valley's pursuit of power. Max is here in our 0:35:28.480 --> 0:35:31.160 Bloomberg Interactive Broker studio. Of course Tim out there in 0:35:31.160 --> 0:35:34.959 our San Francisco bureau. Max, good to have you here. 0:35:35.080 --> 0:35:38.320 We were talking going on, well, you know, we find 0:35:38.400 --> 0:35:40.279 we were thinking about Elon today and like he's in 0:35:40.320 --> 0:35:42.719 this kind of funny spot. He finally brings these two 0:35:42.800 --> 0:35:45.400 astronauts that I know NASA doesn't want us to use 0:35:45.400 --> 0:35:48.080 the word stranded, but we're stranded up in space. They 0:35:48.080 --> 0:35:51.640 were safe, but SpaceX brings him home. At the same time, 0:35:51.680 --> 0:35:54.480 you've got a judge, a federal judge ruling that most 0:35:54.600 --> 0:36:00.680 likely exercised unconstitutional power in the Trump and miss efforts 0:36:00.719 --> 0:36:03.839 to shutter the US agency that manages for an AID. 0:36:04.080 --> 0:36:07.160 I mean, there's so much going on, the highs and 0:36:07.200 --> 0:36:09.840 lows that seemed to be Elon. How do you because 0:36:09.840 --> 0:36:12.360 you continually have to kind of put it all together, 0:36:12.480 --> 0:36:14.560 makes sense? How do you put it all together? 0:36:14.719 --> 0:36:19.320 Well, I think, of course, this SpaceX mission is a 0:36:19.960 --> 0:36:23.280 demonstration of all that that company has achieved. 0:36:23.640 --> 0:36:26.600 They are the main way. 0:36:26.400 --> 0:36:29.480 That America gets its astronauts to and from and cargo 0:36:29.520 --> 0:36:32.120 to and from the International Space Station. There was this 0:36:32.360 --> 0:36:37.560 there is this competing effort that the Boeing craft that 0:36:37.800 --> 0:36:40.760 is going slower and Elon Musk, as you said, stepping 0:36:40.800 --> 0:36:43.880 in Now. I think the problem here is Musk, I 0:36:43.920 --> 0:36:46.600 think in his mind and when you look at like 0:36:46.840 --> 0:36:49.200 some of the things he said about what he wants 0:36:49.239 --> 0:36:51.800 out of the Trump administration, he just sort of expects 0:36:51.880 --> 0:36:56.120 Trump to essentially give a bunch more contracts to SpaceX. 0:36:56.400 --> 0:36:59.080 I think in these court rulings and in some of 0:36:59.080 --> 0:37:02.600 the pushback, we're seeing political pushback as well as pushback 0:37:02.600 --> 0:37:05.440 from consumers, like some of this these vandal you know, 0:37:05.640 --> 0:37:08.840 vandalistic acts on Tesla stores and so on. We're seeing 0:37:08.840 --> 0:37:11.680 that that may prove to be more difficult than I 0:37:11.719 --> 0:37:15.360 think maybe the Elon Musk uh, you know, super fans 0:37:15.400 --> 0:37:16.120 would have believed. 0:37:16.560 --> 0:37:18.040 What do you mean by that, Max, How is that 0:37:18.080 --> 0:37:18.799 more difficult? 0:37:19.080 --> 0:37:19.319 Well? 0:37:19.360 --> 0:37:21.799 I think there's political well sort of, We're a couple 0:37:21.840 --> 0:37:25.400 of things. One is we're starting to see sustained political 0:37:25.440 --> 0:37:28.680 opposition not just to Donald Trump, right, whose poll numbers 0:37:28.719 --> 0:37:31.560 have have dipped a little bit in most polls since 0:37:31.600 --> 0:37:34.160 he took office, but also but even more so to 0:37:34.200 --> 0:37:37.880 Elon Musk. Elon Musk's has gone from being a very popular, 0:37:38.400 --> 0:37:42.040 uh public figure to being an unpopular public figure, even 0:37:42.080 --> 0:37:45.040 even more unpopular than Donald Trump were like a typical 0:37:45.040 --> 0:37:46.200 Republican politician. 0:37:46.600 --> 0:37:48.720 And so so that is going to be a challenge. 0:37:48.760 --> 0:37:53.960 That's a challenge because you know, Democrats and Republicans are consumers, 0:37:54.000 --> 0:37:56.200 and if people are generally mad at Elon Musk, they 0:37:56.239 --> 0:37:58.360 may not buy Tesla's We're seeing that show up in 0:37:58.360 --> 0:38:00.520 some of the Tesla's sales data. I think it's also 0:38:00.600 --> 0:38:03.680 a challenge if we're talking about some sort of effort 0:38:03.920 --> 0:38:06.400 to hand SpaceX another contract. 0:38:06.600 --> 0:38:09.480 Now, of course NASA did use SpaceX. 0:38:08.960 --> 0:38:11.840 To bring these astronauts back, but as he said Carol, 0:38:11.920 --> 0:38:14.840 they didn't really have an option. And and what Elon 0:38:14.920 --> 0:38:17.000 Musk is going to be talking about and is talking 0:38:17.040 --> 0:38:20.160 about to some extent, are are contracts where there are 0:38:20.239 --> 0:38:20.920 other options. 0:38:20.960 --> 0:38:24.239 So this rural broadband program, where Musk. 0:38:24.120 --> 0:38:26.640 And his supporters would very much like the emphasis to 0:38:26.680 --> 0:38:30.640 go away from fiber optic to satellite, that is going 0:38:30.680 --> 0:38:33.839 to have political opposition. We're seeing opposition in Italy where 0:38:33.880 --> 0:38:37.839 Georgia Maloney, who's of course a Musk ally, there's been 0:38:37.880 --> 0:38:42.840 talk of giving SpaceX Starlink the satellite division of SpaceX, 0:38:42.880 --> 0:38:45.680 a big contract. We're seeing opposition there, and then I 0:38:45.719 --> 0:38:48.920 think you're even starting to see little hints of opposition 0:38:49.360 --> 0:38:53.040 to know what you might see as a more transactional 0:38:53.080 --> 0:38:55.719 thing in the US, where if Elon Musk were to 0:38:55.719 --> 0:38:57.440 get what he wants, he would get like a giant 0:38:57.520 --> 0:38:59.400 Mars contract. Now, I think that is going to be 0:38:59.440 --> 0:39:01.200 as I said, it's going to be difficult. They're going 0:39:01.280 --> 0:39:04.480 to be senators, congressmen who are who are in the 0:39:04.520 --> 0:39:08.000 States where these other legacy aerospace contractors are who are 0:39:08.000 --> 0:39:08.920 not going to be happy about that. 0:39:09.560 --> 0:39:12.359 There's also business challenges too, Max, and I'm curious about 0:39:12.360 --> 0:39:14.719 your thoughts on this. We got news this week that 0:39:15.080 --> 0:39:17.600 Shaomi is actually raising its target for a number of 0:39:17.719 --> 0:39:21.160 vehicles that it plans to deliver this year. Byd comes 0:39:21.160 --> 0:39:24.799 out with this five minute charging essentially equivalent of going 0:39:24.840 --> 0:39:28.280 into a gas station filling up your gas tank. Tesla 0:39:28.320 --> 0:39:31.600 doesn't have that technology. In the US, you can't get 0:39:31.640 --> 0:39:34.120 these Chinese autos, but around the world you certainly can. 0:39:34.520 --> 0:39:36.640 It seems like there are some real business realities that 0:39:36.680 --> 0:39:38.280 the Tesla empire is running into. 0:39:38.520 --> 0:39:41.520 Yes, I mean we would be talking about these challenges 0:39:41.600 --> 0:39:44.600 even if the politics were working perfectly for Elon Musk, 0:39:44.800 --> 0:39:49.719 you talked about China. We've seen Chinese automakers make huge strides, 0:39:49.760 --> 0:39:53.440 and you're right, Tesla is protected to some extent because 0:39:53.719 --> 0:39:56.040 these Chinese companies are not in the US. But Tesla 0:39:56.040 --> 0:39:58.920 gets about forty percent of its sales from China, so 0:39:59.280 --> 0:40:01.800 this is like a wrecked threat to its business. Also, 0:40:02.040 --> 0:40:05.239 these companies are operating in other regions where Tesla you know, 0:40:05.320 --> 0:40:08.960 collects a percentage of its sales, so even today this 0:40:09.040 --> 0:40:11.520 is a problem. And then the other thing you're seeing 0:40:11.640 --> 0:40:15.800 is a lot of these Chinese automakers are offering basically 0:40:15.800 --> 0:40:18.480 their own versions of what Tesla calls full self driving. 0:40:18.520 --> 0:40:21.799 This is an advanced driver assistance software suite, and they're 0:40:21.880 --> 0:40:23.640 effectively giving this software away. 0:40:24.239 --> 0:40:26.120 The Tesla bulls had. 0:40:25.960 --> 0:40:28.680 Been expecting that they would be able to charge huge 0:40:28.719 --> 0:40:31.440 sums of money for Tesla Full self driving right now 0:40:31.600 --> 0:40:34.200 cost about one hundred bucks a month now, and when 0:40:34.280 --> 0:40:35.680 Musk has talked about he said, it's going to get 0:40:35.719 --> 0:40:38.600 even more expensive because if you could, you know, take 0:40:38.600 --> 0:40:40.160 a nap in your car, that would be worth even 0:40:40.200 --> 0:40:42.440 more what were now. I think there are reasons to 0:40:42.440 --> 0:40:45.359 be skeptical. I wouldn't, you know, if you're driving down 0:40:45.400 --> 0:40:47.320 the highway right now, I wouldn't take any sleeping pills 0:40:47.320 --> 0:40:50.520 and trust the Tesla. But that said, even if that 0:40:50.640 --> 0:40:53.120 technology were to pan out, even if it were to 0:40:53.200 --> 0:40:55.680 do exactly what Elon Musk says it's going to do, 0:40:56.120 --> 0:40:59.480 there are potentially other companies doing the same thing for 0:40:59.600 --> 0:41:00.960 less money, and that's a challenge. 0:41:01.000 --> 0:41:04.160 I feel like the million billion, trillion dollar question though, Max, 0:41:04.440 --> 0:41:08.760 is is there information that Elon Musk is getting working 0:41:08.760 --> 0:41:10.759 within the government that is going to give him this 0:41:10.840 --> 0:41:14.360 incredible advantage or access to data? I think about you know, 0:41:14.400 --> 0:41:17.239 the AI you know startup that he's involved in, and 0:41:17.560 --> 0:41:19.960 like all this stuff, is there stuff or do we 0:41:20.000 --> 0:41:22.920 not even know that he is getting access that even 0:41:23.200 --> 0:41:26.200 if he leaves tomorrow, that he has an advantage in 0:41:26.239 --> 0:41:26.920 some way. 0:41:26.840 --> 0:41:27.560 I mean he has. 0:41:27.760 --> 0:41:31.880 I think that in theory, yes, you know, AI systems 0:41:31.880 --> 0:41:33.120 rely on huge sums of data. 0:41:33.160 --> 0:41:36.080 If Elon Musk were able to like funnel a. 0:41:36.040 --> 0:41:39.480 Bunch of if data were to leak from the federal 0:41:39.560 --> 0:41:43.200 government into GROCK, you know Elon Musk's large language. 0:41:42.880 --> 0:41:45.840 Model, that could in theory help GROCK. 0:41:46.000 --> 0:41:48.760 But I think there are are a number of reasons, 0:41:49.080 --> 0:41:51.319 not that I don't know that that's the most likely 0:41:51.360 --> 0:41:53.160 scenario or the most concerning scenario. 0:41:53.200 --> 0:41:53.719 There would be. 0:41:53.800 --> 0:41:58.840 Ethical issues, legal issues, issues of personal privacy, and also 0:41:59.360 --> 0:42:03.600 I just think that the political advantages he has by 0:42:03.640 --> 0:42:07.839 being close to Trump probably vastly outweigh whatever. You know, 0:42:08.600 --> 0:42:11.239 you know, incremental data. There are a lot of data sets, 0:42:11.239 --> 0:42:13.560 a lot of financial data sets out there. I do 0:42:13.680 --> 0:42:16.960 think some of these agencies that are being you know, 0:42:17.640 --> 0:42:20.560 as you know the Trump administration and supporter see it reformed, 0:42:20.560 --> 0:42:24.239 as its critics would say, gutted, were agencies that were 0:42:24.239 --> 0:42:28.000 investigating Elon Musk. We're holding Elon Musk companies backs, you know, 0:42:28.360 --> 0:42:32.000 x Elon Musk's you know, the new name for Twitter 0:42:32.200 --> 0:42:36.560 has been trying to launch these payment services, effectively mobile 0:42:36.560 --> 0:42:39.040 banking through you know, the company that you use to 0:42:39.080 --> 0:42:43.520 send memes and uh and and the CFPB has been 0:42:43.520 --> 0:42:46.799 one of the barriers there, like CFPB, you know, is 0:42:47.239 --> 0:42:50.040 it has been you know, it's it's in the courts now, 0:42:50.080 --> 0:42:52.879 but but the Trump administration is essentially attempting to shut 0:42:52.920 --> 0:42:56.680 it down. NITSA, the highway regulators, they have been investigating Tesla. 0:42:56.760 --> 0:42:59.440 There are ways in which Musk. 0:42:59.239 --> 0:43:01.040 Could sort of clear or a path in terms of 0:43:01.040 --> 0:43:04.839 from a regulatory perspective. But again, all these things are 0:43:04.880 --> 0:43:09.680 going to create political consequences downstream, political consequences, and that 0:43:09.840 --> 0:43:12.600 those it's gonna be primarily Democrats, that's who we're seeing 0:43:12.680 --> 0:43:15.239 protesting in front of Tesla stores, but I would not 0:43:15.280 --> 0:43:18.600 be surprised if you also see some Republicans with concerns 0:43:18.600 --> 0:43:19.520 about this stuff as well. 0:43:20.239 --> 0:43:20.439 Well. 0:43:20.520 --> 0:43:23.200 It seems like now, Max, the courts are really, as 0:43:23.239 --> 0:43:25.080 Carol mentioned in our intro, the. 0:43:25.040 --> 0:43:25.480 Courts have. 0:43:27.480 --> 0:43:30.279 Not reined in, but they've certainly said that some of 0:43:30.280 --> 0:43:34.719 what Elon Musk has done is not allowed, especially with 0:43:34.760 --> 0:43:38.440 regard to us aid. You know, the questions whether or 0:43:38.440 --> 0:43:42.040 not these employees can actually go back to work and 0:43:42.120 --> 0:43:44.520 if they're going to be reinstated full time. We don't 0:43:44.560 --> 0:43:47.960 know the answer to that yet. But are the courts 0:43:48.000 --> 0:43:48.840 that raining him in. 0:43:49.880 --> 0:43:54.000 Yes, the courts are reigning in Doje and or at 0:43:54.080 --> 0:43:59.640 least maybe creating a situation where what Musk is doing 0:43:59.760 --> 0:44:02.440 is not to have a huge long term effect, or 0:44:02.520 --> 0:44:04.480 even that it may end up costing more money, because 0:44:04.520 --> 0:44:05.920 of course, if you have to, if you lay a 0:44:05.920 --> 0:44:07.560 bunch of people off you spend a bunch of people, 0:44:07.680 --> 0:44:09.440 spend a bunch of money laying people off, and then 0:44:09.440 --> 0:44:11.319 you have to spend a bunch of money bringing them 0:44:11.320 --> 0:44:13.960 back online. That ends up costing more money. So there 0:44:14.000 --> 0:44:16.359 is a situation, there is a way in which some 0:44:16.400 --> 0:44:18.520 of some of this stuff that's working its way through 0:44:18.560 --> 0:44:20.600 the courts ends up sort. 0:44:20.400 --> 0:44:22.800 Of blunting the impact of DOGE. 0:44:22.880 --> 0:44:25.560 I mean, it's important remember Musk is not the only 0:44:25.680 --> 0:44:28.880 actor within the Trump administration who's or within the Republican 0:44:28.920 --> 0:44:31.160 Party who is trying to rein in parts of the 0:44:31.160 --> 0:44:33.719 federal government. And so so Trump is trying to do 0:44:33.800 --> 0:44:37.520 this as well. Congress will certainly, I think, at least 0:44:37.600 --> 0:44:41.040 attempt to put some of this into law. So there 0:44:41.080 --> 0:44:43.160 will be you know that Musk will have some support. 0:44:43.239 --> 0:44:45.040 It's not just going to be Musk versus the courts. 0:44:45.800 --> 0:44:52.239 Should we assume that as long as Elon's deep pockets 0:44:52.320 --> 0:44:57.960 are around to support the Republicans and Trump's doings, that 0:44:58.120 --> 0:44:59.759 he's going to stick around. I think there's a lot 0:44:59.800 --> 0:45:01.800 of just ussion about, you know, when does the president 0:45:01.840 --> 0:45:02.720 get tired of Elon? 0:45:02.880 --> 0:45:03.120 Right? 0:45:03.600 --> 0:45:06.959 Yes, that's the conventional wisdom is at some point Trump 0:45:07.040 --> 0:45:09.640 will get tired of seeing Elon Musk's you know face, 0:45:09.960 --> 0:45:13.600 you know, on TV or newspapers, hearing people talk about 0:45:13.600 --> 0:45:15.279 it when when they should be talking about all the 0:45:15.280 --> 0:45:17.799 great things he's done, get frustrated and he'll get sort 0:45:17.800 --> 0:45:18.439 of iced out. 0:45:18.920 --> 0:45:21.920 I think that is not very likely, and. 0:45:22.200 --> 0:45:25.200 It's for the exact reason you just said, Carol. Musk 0:45:25.400 --> 0:45:30.360 is a major donor to the Republican campaign, to Republican campaigns. 0:45:30.480 --> 0:45:32.760 He will be a major force by his own account 0:45:32.760 --> 0:45:37.120 anyway in the midterm elections. And really he is is 0:45:37.160 --> 0:45:40.360 a very important ally for President Trump because if Trump 0:45:40.400 --> 0:45:43.000 is trying to do something and there's opposition from Congress, 0:45:43.080 --> 0:45:45.959 he has this very very very very wealthy friend, Elon Musk, 0:45:46.040 --> 0:45:49.080 who can fund a primary challenge. The other thing is, 0:45:49.120 --> 0:45:52.200 we saw this infomercial, you know at the White House 0:45:52.200 --> 0:45:54.440 where Trump you know, talked about all the wonderful things 0:45:54.480 --> 0:45:56.920 about Tesla and in fact bought a Tesla you know, 0:45:57.000 --> 0:45:59.319 on the south lawn of the White House. You know, 0:45:59.640 --> 0:46:04.640 really helpful problem or potentially very helpful to Tesla. You know, 0:46:04.680 --> 0:46:07.040 that seem to be the goal. Around the same time, 0:46:07.080 --> 0:46:10.200 New York Times reported that Musk had promised to put 0:46:10.239 --> 0:46:14.480 one hundred million dollars into Trump's own packs. So Musk 0:46:14.560 --> 0:46:17.399 is still donating money on top of the roughly three 0:46:17.480 --> 0:46:20.720 hundred million he put into the twenty twenty four cycle. 0:46:20.920 --> 0:46:22.759 He said he's going to put more into his own packs. 0:46:22.760 --> 0:46:26.879 He in fact is funding this Wisconsin State Supreme Court race. 0:46:27.480 --> 0:46:29.359 There are going to be more races, and he's giving 0:46:29.360 --> 0:46:32.120 Trump money. I mean, he is a very very important la. 0:46:32.280 --> 0:46:35.560 I think the real question is does Musk get tired 0:46:35.560 --> 0:46:38.080 of this? Does Musk start to wonder do I really 0:46:38.160 --> 0:46:39.359 want to have a day to day role? 0:46:39.600 --> 0:46:41.680 And how much is that day to day role hurting 0:46:41.680 --> 0:46:42.160 my companies? 0:46:42.160 --> 0:46:44.440 Because you look at a stock price, investors are not 0:46:44.480 --> 0:46:45.520 super happy. 0:46:45.400 --> 0:46:48.239 All right, Always a lot going on and so appreciate 0:46:48.280 --> 0:46:50.680 it keeps us busy. I'm always confused. How many more 0:46:50.680 --> 0:46:53.680 headlines is it Trump versus like we get in any 0:46:53.680 --> 0:46:55.840 given day. Max Chak and thank you so much. Calmness 0:46:55.840 --> 0:46:58.240 with Bloomberg Business Be co host of the Elon Inc. Podcast, 0:46:58.239 --> 0:47:00.880 which you can find where every you get your podcast, 0:47:00.960 --> 0:47:03.520 also on the Bloomberg and at Bloomberg dot com. 0:47:04.000 --> 0:47:08.840 This is the Bloomberg Business Week podcast, available on Apple, Spotify, 0:47:08.960 --> 0:47:12.680 and anywhere else you get your podcasts. Listen live weekday 0:47:12.719 --> 0:47:16.760 afternoons from two to five pm Eastern on Bloomberg dot Com, 0:47:16.800 --> 0:47:20.680 the iHeartRadio app tune In, and the Bloomberg Business app. 0:47:20.920 --> 0:47:23.680 You can also watch us live every weekday on YouTube 0:47:23.920 --> 0:47:26.080 and always on the Bloomberg terminal